Peloton executives sued for alleged Insider Trading
Some of Peloton’s former and current executives are reportedly being sued by a Peloton shareholder - claiming they engaged in insider trading, stemming from the sale of stock in 2021 as the Tread+ was recalled.
The lawsuit was filed on 18th November by investor Krikor Arslanian, made public on 28th November and first reported by Bloomberg Law.
The suit names 12 individuals, including Erik Blachford, Karen Boone, Jon Callaghan, Jay Hoag, William Lynch, Pamela Thomas-Graham, Howard Draft, John Foley, Tom Cortese, Jill Woodworth, Hisao Kushi, and Mariana Garavaglia.
“As a result of these incident reports and insider stock selling of $379,691,461.66 by nine of the Individual Defendants while in possession of material non-public information and [redacted] Peloton stock has since imploded, losing almost 95% of its value and trading at $8.98 as of September 8, 2022,” the suit reads.
Foley co-founded the company in 2012 with Kushi. Foley resigned as executive chairman on 12th September 2022 and Kushi resigned as chief legal officer on 3rd October 2022.
While Peloton’s stock rose to an all-time high in December 2020 due to the at-home fitness boom caused by COVID-19, significant safety issues emerged.
Arslanian claims that in 2021 the named Peloton executives sold $500 million in stock before the company revealed safety issues with the Tread+ treadmill that included about 39 reports of injuries and one death of a child. The lawsuit alleges that the executives would have had knowledge of the incidents when they sold their stock.
In April 2021, the Consumer Product Safety Commission (CPSC) urged Peloton to recall its Tread+. Initially, the company refused, but on 5th May, 2021, Peloton announced it would voluntarily recall over 100,000 of its treadmills in the USA and UK following their alleged link to the death of a six-year-old child and a series of incidents that had seen adults, children, pets or other items being pulled under the rear of the treadmills.
Having initially denied that there was any danger with using the machines, Foley went on to announce that the firm had "made a mistake" in not recalling the machines sooner.
The company said it would stop selling and would offer full refunds for its Peloton treadmills, which cost more than $US4,200, in the USA and UK.
Having earlier described the death of the six-year-old, who was pulled underneath the rear of the treadmill, as a "tragic accident" and one of a "small handful" of incidents, Foley released a statement advising "I want to be clear, Peloton made a mistake in our initial response to the Consumer Product Safety Commission's request that we recall the Tread+.
"We should have engaged more productively with them from the outset. For that, I apologise."
In September 2022, Peloton announced that it could face fines from the CPSC for allegedly violating federal safety laws related to its Tread+ treadmills. The company faces several lawsuits from families related to the accidents.
The recall on the Tread+ recently was extended through November 2023 as the company works on additional safety features.
Image: Peloton Tread+
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